Ernst Russ AG) (ERAG) continued its efforts towards a strategic shift, with real estate (revenues grew by c five times y-o-y in FY17) and shipping (sales up 8.1% y-o-y) acting as the key drivers post acquisition. Management guided to modest revenue growth powered by ship and asset management, and real estate but flat operating earnings in FY18 vs FY17 (€3.9m). Due to the previous volatility in shipping markets and lack of immediate earnings momentum implied by current management guidance, ERAG’s market cap/AUM ratio continues to lag the peer average.
FY17 results driven by real estate revenues
ERAG’s net profit declined to €5.6m in FY17 from €6.2m in FY16, primarily due to increased costs related to crewing services and a decline in other operating income. Group revenues reached €44.0m, led by higher contribution from the real estate business (15.5% vs 3.5% in FY16) and an 8.1% y-o-y increase in shipping revenues, which was primarily assisted by first-time recognition of crewing activities revenues (up by €3.0m y-o-y) for the full year, partially offset by a decline in sales/profit fees, and revenue from asset management. Revenue in the real estate business grew from €1.4m to €6.8m, driven by commissions for property sales, new tenancy agreements, fund management fees and the sale of land in Leipzig.
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